Occupancy down, but price is attractive
I have been a long-time holder of this stock and while it never sets the world alight, it is a nice, steady investment, although to a degree its growth is tied to the local economy as most of its guests are business people. With the economy under pressure, the company saw occupancy levels drop to 66%. This hit headline earnings per share (HEPS) growth, which was at only 2% and leverage worked against the company.
Leverage is the largely fixed cost with variable revenue. A drop in occupancy hence sees a larger drop in profit with the inverse being true; occupancy back at 70% will push profits much higher.
The move into the rest of Africa is starting to pay off well, while the oversupply of hotel rooms in the wake of the 2010 World Cup has worked its way out of the system.
I like the stock, and the price at under R150 is attractive, even though it will likely only be in 2018 that occupancy rates start to rise again strongly.
With the economy under pressure, the company saw 66%.occupancy levels drop to